What is commodities market?
Trading on raw and primary products is coming under commodities market, this is a physical and virtual marketplace where you can buy, sell and trade through commodities market, very much similar to stock market. Currently approx 50 commodity markets in worldwide available for trading with minimum 100 primary commodities. Available commodities for trading will be on the basis of hard and soft commodities.
Hard commodities are come through natural resource and mined or extracted like – gold, silver, rubber, and oil Soft commodities are agricultural products like – Wheat, sugar, soya, coffee and else.
There are different ways to invest in commodities market; you can purchase stocks in a corporation, or mutual funds, index funds, or through exchange trading, on commodities related company. You can invest as a buyer into a future contract, that obligates to buy or sell commodities at pre determine the price at a future date.
The Commodities exchanges are an entity and nonprofitable association that enforces the rule and regulation, procedures for trading for commodities. The exchange is also referred to the physical center where trading will take place. Trading on agricultural products is started from the 19th century like- corn, coffee, cattle and else. You can trade with future options suppose you trade on corn, producer purchase its future contract on a specified amount at a future date, on that time a price can go up or down as per demand and supply laws, then producer can buy and sell as per according to rate available in commodities market, and book profit or as well as loss from future changes in corn prices.
The major exchange in the US who allow on commodities trading is estd. At Chicago and New York and other places within the country. In India, the commodities exchanges are at Mumbai and his index is known as COMDEX but more commodities exchanges are all over the country on localized based.
The Chicago commodities exchange established in 1848 as Chicago Board of Trade (CBOT), allows trading on Gold, Silver, Soybeans, wheat, corn, oats, rice, ethanol and else. On the same New York Board of Trade, (NYBOT) commodities allow the trading on coffee, cocoa, orange juice, sugar, and few more on its, a New York Mercantile Exchange (NYMEX) is allowed to trading on gold, silver, copper, aluminum, platinum, and else products.
Trading on these products are same as stocks market trading a major difference is that it’s totally future trading, now like an equity to carry forward, in the same manner, you just have to sell out or squared off the deal on a future date. Or roll over to next future date. Commodities are predominantly traded electronically in US exchange, Indian commodities exchanges and UK exchanges and else.
Regulatory of Commodity Markets:
The forward market commission (FMC) the main regularity authorities of commodities in the Indian market for commodities trading. Headquarter of this financial regulatory is at Mumbai which is over seen by the minister of a fiancé, their trading is allowed in 22 exchanges in India with 6 national exchanges. On 28th September 2015, FMC is merged with SEBI. First derivatives market in India is established in 1875 in Mumbai, where basically cotton future was traded only. After that, this becomes a volume trading and increased reportedly, and become active industries.
On the same way in the US, the commodities future trading commission (CFTC) is regularity authorities for commodity future and option trading market. It’s present the transparent market that helps to protect the consumers to get fraud or cheated by other market manipulators.
Now we can understand the commodities/derivatives market, run under the regulatory authorities in all over the world and are future dated.